Canadian Crypto Exchanges Faces Deadline For CIRO Membership

Last updated:08/06/2024

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Canada’s regulators have set a deadline for crypto trading platforms (CTPs) to complete their applications for Investment Dealer status and membership with the Canadian Investment Regulatory Organization (CIRO).

This push comes at the end of the previously allowed transitional period when Canadian crypto trading platforms (CTPs) are expected to meet established financial regulatory standards.

CTPs must now demonstrate compliance with CIRO membership criteria and Investment Dealer status requirements, signaling a new era of enhanced regulatory oversight in the country’s cryptocurrency industry.

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Deadline Approaches for Canada Crypto Exchanges
Regulatory Compliance Urged
Next Steps for Crypto Exchanges
Canadian Crypto Securities Regulation Taking Shape

Deadline Approaches for Canada Crypto Exchanges

As the CIRO membership deadline looms, Canadian Crypto Trading Platforms (CTPs) are scrambling to align their operations with legal norms.

Both the CSA and CIRO have recently reminded these platforms of the urgent need to transition from being mere restricted dealers to fully fledged investment dealers. This shift is crucial for CTPs, ensuring their continued legality within Canada’s financial market.

In a staff notice that was released in march 2021, it was made known that CTPs were given a temporary period of time within which they could offer their products while seeking for full authorization.

Nevertheless, as stated by the CSA, “Given the time that has elapsed, CSA members expect that CTPs would have thoroughly assessed and understood the requirements for registration as investment dealers and CIRO members and be working closely with CIRO on their applications.”

Regulatory Compliance Urged

As regulatory pressure mounts, more organizations are being compelled to comply with established rules. The CSA and CIRO had previously provided recommendations and interim measures, allowing some flexibility in crypto exchange operations.

Nevertheless, this lenient approach is gradually being phased out, with clear expectations set for CTPs to meet the full requirements of CIRO membership.

In response, some platforms, like Coinsquare, have adapted and secured CIRO membership. Conversely, others have chosen to exit the Canadian market rather than conform to the stringent regulations, highlighting the diverse strategies within the industry. This shift underscores the evolving landscape of cryptocurrency regulation and its impact on exchange platforms.

Next Steps for Crypto Exchanges

This measure follows a series of initiatives undertaken by Canadian authorities to strengthen market oversight, particularly in the wake of events that precipitated the downfall of numerous blockchain enterprises.

The resolute stance adopted by CIRO and the CSA aims to foster a safer and more regulated environment for cryptocurrency investors in Canada.

Moving forward, CTPs are mandated to submit exhaustive applications demonstrating their operational preparedness, financial stability, and adherence to CIRO’s rigorous standards. In parallel, CIRO has devised a Readiness Questionnaire as a tool to assist platforms in assessing their readiness for CIRO membership. This assessment process serves as a crucial screening mechanism to ensure that admitted platforms possess the capabilities and fulfill the legal prerequisites established by CIRO.

Canadian Crypto Securities Regulation Taking Shape

In August 2022, the CSA embarked on establishing pre-registration prerequisites for CTPs, initiating with the imposition of mandatory commitments—binding agreements—pertaining to customer safeguards. The CSA subsequently tightened these requirements substantially in a second notice issued in February 2023, reflecting heightened vigilance in the wake of cryptocurrency firms’ failures during the bear market. Notably, the second set of requirements had a pronounced impact on stablecoins.

Crypto exchanges responded to this new regulatory landscape in diverse ways. Kraken and Gemini promptly embraced the new standards, while OKX, dYdX, Paxos, ByBit, and Binance announced their exit from the Canadian market.

In July 2023, the CSA issued guidance aimed at investment firms holding cryptocurrency, further elaborating on this guidance through a proposal in January. Notably, Canada has had Bitcoin exchange-traded funds (ETFs) available since 2021, highlighting the country’s evolving stance towards cryptocurrency investments.

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